workshop 4 - The downstream firm needs one unit of input...

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ECOS2201 - Economics of Competition and Strategy Workshop - 4 1. Discuss the role of asset specificity in the hold-up problem. 2. A merchant buyer strategy a. involves always purchasing inputs on the market b. encourages inefficient production c. involves purchasing inputs from the supplier offering the best price / quality combination even if the input is produced within the firm d. requires the input to always be made within the firm 3. Let final product demand be given by p = 100 - Q.
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Unformatted text preview: The downstream firm needs one unit of input to produce one unit of output. It buys the input from the upstream firm. The marginal cost of producing the input is constant, c = 20 . i. if both firms are monopolists, find the profit maximising input and output prices as well as the profit of the upstream and downstream firms ii. What would be the profit if the input and output were produced by one firm. Is there an incentive for vertical integration? 1...
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This note was uploaded on 02/16/2010 for the course ECOS Economics taught by Professor None during the One '09 term at University of Sydney.

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